Acc 553 Week 6 You Decide Essay

838 Words Feb 17th, 2013 4 Pages
I have reviewed your situations and each of your tax considerations and outlined my advisement below.

Part I: Discuss the various forms of organization that are available to Penelope, Mark and John. There are a few different options from which you can chose to organize your business under. For example: partnership, LLP, S Corporation, C Corporation for which I know you are all familiar with. It is my duty to give you my own educated and unbiased opinion to which would be most beneficial to all of you.

Part II: Make your recommendation as to what form of organization you believe will be best and be sure to explain the reasoning for your choice. I find the Limited Liability Partnership to be the best form of organization for your
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This means that a partnership interest will have a split holding period.

Part IV: Discuss, in detail, how this entity is taxed (if at all) and what filing requirements it has with the IRS. An LLP has pass-through taxation and the income is reported on each partner’s personal tax returns, avoiding any federal tax on profits. (Code Sec. 702) The LLP will be taxed this way by default; however the option to be taxed as a corporation is also available. Every partnership must file an annual return regardless of the amount of its net income or its net loss in its operations. (Code Sec. 701; Reg. §1.701-1; Code Sec. 6031). Form 1065 must be filed every year by the 15th of April.

Part V: Discuss how income and distributions may/will be allocated to Penelope, Mark and John. Profits are shared equally or by percentage ownership if that is how you divide the company ownership.

Part VI: Discuss, in detail, how the individuals are taxed (if at all) with respect to the net profits from this entity and what filing requirements they will each have with the IRS. Individuals in a partnership are normally liable for filing personal income taxes, self-employment taxes and estimated taxes for themselves, according to the Internal Revenue Service. Each individual will file a Schedule K-1. The partnership itself is not responsible for paying taxes. The credits and

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